3 Essential Lessons From the GE Disaster

The epic fall of General Electric (GE) is one of the most severe cases of shareholder wealth destruction in corporate American history. Once worth over $600 billion this bluest of blue chips (and a dividend aristocrat to boot) is now worth just $88 billion. That means GE has erased over $500 billion worth of value, a figure that’s greater than Facebook (FB) is worth today.

Let’s look at three essential lessons the collapse of this venerable blue chip should teach all investors about protecting their hard earned wealth.

The Wheels Can Fall Of The Bluest Of Blue Chips

GE is 126 years old and has been paying uninterrupted dividends for 119 straight years. They are one of the most storied companies of all time, having been co-founded by Thomas Edison and JPMorgan. And up until it cut its dividend during the Financial Crisis GE was a fabled dividend aristocrat (S&P 500 companies with at least 25 straight years of dividend growth).

But even aristocrats, the bluest of blue chip dividend stocks, can fall from grace. Here are the former aristocrats who have cut (sometimes to zero) their dividends over the past decade.

And three more former aristocrats lost their status, thanks to freezing their dividends for longer than seven quarters (the maximum allowed to remain an aristocrat and achieve positive YOY annual dividend growth).

Johnson Controls
Eli Lilly
M&T Bank

Heck, Sears (though never an aristocrat) was once the Amazon of its day and the largest retailer on earth. That bankruptcy (and likely future liquidation) also has three important lessons to teach investors.

The point is that with all companies, even blue chips, you need to adopt a Reagan-like the mentality of “trust but verify.”